Regulatory Updates - September 2020

Australia

Ride sourcing now considered ‘taxi travel’ and considered exempt from fringe benefits tax (FBT)

The Australian Taxation Office (“ATO”) has extended the taxi travel exemption to include ride-sourcing vehicles, for fringe benefits tax (“FBT”) purposes.

Before the amendment, a taxi was defined for FBT purposes as ‘a motor vehicle licensed to operate as a taxi’. FBT exemption did not extend to ride-sourcing services provided in vehicles that were not licensed to operate as a taxi.

Pursuant to the amendment, employers will now be eligible for the Fringe Benefit Tax (“FBT”) exemption for travel provided to their employees, if it’s a single trip to or from the employee’s workplace:

  • On or after April 1, 2019.
  • In a licensed taxi or other vehicles, involving the transport of passengers for a fare – other than a limousine – such as a ride-sourcing vehicle.

Travel is also FBT exempt if it is as a result of sickness, or injury to, the employee, and whole or part of the journey is directly between:

  • The employee’s place of work
  • The employee’s place of residence
  • Any other place that it is necessary, or appropriate, for the employee to go as a result of the sickness or injury.

Implication

The change means any benefit arising from travel by an employee using a registered taxi or ride-sourcing provider (other than in a limousine) is now exempt from FBT subject. The employers will have to review the travel policies offered to the employees.

Australian Regulator Sues Google for misuse of personal information for targeted advertising .

Australia’s antitrust authority launched federal court proceedings against Alphabet Inc.’s Google for allegedly misleading millions of consumers about expanded use of personal information for targeted advertising.

The Australian Competition and Consumer Commission (“ACCC”) has claimed, Google failed to properly inform consumers, and did not gain their explicit consent, about its move in 2016 to start combining personal information in users’ Google accounts, which also included browsing information on non-Google sites. As a result, data about users’ non-Google online activity became linked to their names and other identifying information held by Google. Previously, this information was kept separate from users’ accounts, and the data was not linked to an individual user.

The ACCC also alleged that Google misled consumers about a related change to its privacy policy, stating

Google significantly increased the scope of information it collected about consumers on a personally identifiable basis. This included potentially very sensitive and private information about their activities on third-party websites. The use of this new combined information allowed Google to increase significantly the value of its advertising products, from which it generated much higher profits.”

Brazil

COFINS-Digital for companies in the digital services sector

Brazil has proposed a “COFINS-Digital” tax through its Bill No. 131/2020. COFINS-Digital will be a separate tax on legal entities operating in the digital economy sector and it will be levied at a rate of 10.6% on the gross monthly revenue earned in relation to digital services.

The COFINS-Digital tax will be applicable to legal entities, irrespective of their location of the establishment, whose monthly revenue exceeds USD 20 million for services provided worldwide or more than BRL 6.5 million for services provided in Brazil.

Implication

If approved, there will be an increase in tax liability for businesses involved in providing digital services that exceed the revenue criteria.

Extension of 2 months granted for suspension of employment contracts and 1 month for reduction of wages and hours of employees

Brazil’s National Congress has passed a Decree 10,422, of July 13, 2020, under Brazil’s Law No. 14,020, of July 6, 2020, for reducing the economic and social impact of the COVID-19 pandemic in Brazil.

The objective of Law No. 14,020 is to preserve employment and income, provide guarantee towards the continuity of work and business activities, etc. and create a program called “Emergency Benefit of Preservation of Employment and Income.” Under this program, the maximum extension period for suspension of employment contracts and reduction of wages was 90 days and 60 days, respectively.

The decree 10,422 has extended such period by 30 days and 60 days for suspension of employment contracts and reduction of wages, respectively. Thus, the maximum emergency benefit period is 120 days in both scenarios.

Here, the employer is required to register the worker on the portal of Brazil’s Ministry of Economy for requesting payment of the benefit.

Implication

Employers in Brazil can avail of the emergency benefits of preservation of employment and income for an extended period as provided.

Changes in E-invoicing system – Introduction of new types of e-delivery notes

The State Secretary of Finance (“SEFAZ”) of Brazil has announced changes in Brazil’s electronic invoicing system. The changes include new types of electronic tax documents, new functionalities of the SAFEZ platform, etc.

Earlier, the delivery notes (“Canhotos”) were generated and signed on paper as a part of DANFE (Documento Auxiliar da Nota Fiscal Eletrônica) or DACTE (Documento Auxiliar de Conhecimento de Transporte Eletrônico) system.

From August 2020, Canhotos for invoice (Nota Fiscal Eletrônica - NF-e) and transportation invoice (Conhecimento de Trasporte Eletrônico - CT-e) can be issued electronically. However, the issuance in electronic format is voluntary and printed version of DANFE and DACTE system is still in use.

Canada

British Columbia: Introduction of Provincial Sales Tax (PST) at a rate of 7% on digital services provided by non-resident provider, effective from July 1, 2020

Effective from July 1, 2020, British Columbia (“B.C.”) has introduced the Provincial Sales Tax (“PST”) on digital services provided by non-resident businesses to the consumers residing in B.C. province. The PST rate will be 7% on these types of supplies. This will be subject to the annual registration threshold of CAD 10,000 and will apply to electronic services such as music, internet services, streaming games, applications, e-books, e-journals, films, etc.

Implication

There will be an increase in compliance as businesses involved in providing digital services to consumers in British Columbia (“B.C.”) province are now subject to PST.

Canada Emergency Wage Subsidy (CEWS) proposed to be extended and redesigned

Canada’s Federal Government has proposed to extend the “Canada Emergency Wage Subsidy” (“CEWS”) from August 29, 2020, until December 2020. It will be available to all employers who have experienced any decline in business revenue from July 2020 to November 2020 as compared to the respective prior months in 2019. Currently, there is a 30% revenue declined threshold.

Canada (British Columbia): Changes made in Workers Compensation Act becomes effective

Effective from August 14, 2020, there will be significant changes to the Workers Compensation Act. Some of the major changes are as follows:

  • Immediate preventive health care is to be provided on pending claims in a case where the medical evidence is showing such services are essential for the worker’s health and its prevention from significant deterioration.
  • “Mental Disorder” is distinguished from personal injuries for the purpose of the 1-year time limit for filing a compensation claim. It will prevent barriers from filing the claims.
  • To fast track COVID-19 claims, it is decided to remove 90 days waiting period regarding the effective date of presumption relating to infections from communicable viral pathogens.
  • The directors of a corporation will be held liable jointly and severally for any debt accrued by the corporation towards WorkSafeBC.
  • WorkSafeBC is been provided with search and seizure power through a warrant issued by a judge for any workplace investigations based on the grounds such as any offense under the act is committed.

However, the following provisions are taking effect from January 1, 2021:

  • The maximum insurable earnings threshold and maximum wage rate will increase to CAD 100,000 from CAD 87,100.
  • Benefits under permanent partial disability will be based on the higher of a loss of earnings or loss of function calculation.
  • The retirement age of a worker may be decided when a worker has reached the age of 63.

China

Beijing puts restrictions on local HR agencies on Social Insurance and Housing Fund (SI&HF) payments for Beijing-based employees

Employer and employee contribution to social insurance and housing fund is mandatory in China. The payments are withheld by the employer and the same is remitted to the local authorities where the company is registered. In case the employer is registered in one city such as Shanghai and needs to hire an employee in Beijing, then the company is bound to make social insurance and housing fund contributions for the employee in Beijing. Till now, for complying with these obligations, the company used to hire the local HR agencies such as CIIC, China Star, FESCO, etc. for handling the withholding payment of social insurance and housing fund (SI & HF) for the employees in Beijing.

However, Beijing social insurance authorities on June 30, 2020, issued an internal notice ( the Notice on Issues Regarding Labor Dispatch Enterprises and Human Resource Service Enterprises Participating in Social Insurance Scheme ) regarding the administration management of social insurance and housing fund payments handled by local HR agencies on behalf of its clients. As per the notice if a local HR agency enrolls the employee under its account for social insurance and housing fund contribution purpose, it is mandatory in the employment contract to input the following information:

  • Employee type (dispatching or own staff),
  • Employee designation,
  • Monthly salary,
  • Start and end date of the employment contract
  • Employer’s business registration code

Based on the above changes specified by the internal notice, the local HR agencies are not able to either enroll the new employee or continue to handle the existing enrolled employee for social insurance and housing fund payment, if the employer in the employment contract is different to the employee's social insurance and housing fund withholding party (i.e. the HR agent). Hence the agent will have to cease providing the social insurance and housing fund withholding payment service for its clients.

Implications

The company must take immediate action to ensure that the social insurance and housing fund payments for Beijing employees are not disturbed. There are following three options available:

  • Set up a local entity/branches in Beijing
  • Transfer employee's social insurance and housing fund contributions to a city where the company is currently registered
  • Use a dispatch arrangement

The notice is currently applicable to Beijing only and it is highly likely to become a law in other cities too. In case if this becomes effective in another city like Shanghai then it will mean that every company will need branches in every city they plan to employ in a similar manner as that of Beijing.

Germany

Occupational Pensions: New law introduces insolvency protection for pension benefits granted via pension insurance funds (Pensionskasse)

As published in the Federal Law Gazette on June 23, 2020, the new law (“Siebtes Gesetz zur Änderung des Vierten Buches Sozialgesetzbuch und anderer Gesetze“, BGBl) states that pension benefits granted through pension insurance fund (Pensionskasse) will be protected against the insolvency of the employer.

The German Insolvency Insurance Association (Pensionssicherungsverein – PSV) monitors and protects the pension benefits against insolvency i.e., in the event of the company’s insolvency, the employee will receive the full amount of the company pension.

Implications

  • The new law will be in effect from 2021;
  • The law provides an additional protection to affected employees;
  • Employers will have to pay an additional contribution in the future to the PSV if it enrolls its employees under this particular type of pension fund scheme.

Hong Kong

Hong Kong to amend employment laws; Maternity leave to be increased from 10 weeks to 14 weeks

The Hong Kong Legislative Council passed the Employment (Amendment) Bill, 2019 on July 9, 2020. The key highlights of the amendment include:

  • Extension of the statutory limit of maternity leave from ‘10 weeks’ to ‘14 weeks’.
  • Paternity leave can be taken within a period of ‘14 weeks’ after the actual date of delivery instead of the current ‘10 weeks’ period.
  • In case of miscarriage, an employee will remain eligible for statutory maternity leave, if her pregnancy lasts for ‘24 weeks’ or more instead of the earlier ‘28 weeks’ period.
  • The cap for maternity leave pay is increased to HKD 80,000 from earlier HKD 36,822. The additional payment will be borne by the Hong Kong SAR government under an administrative reimbursement scheme.
  • ‘Certificate of attendance’ issued by any recognized professional (such as a registered medical practitioner, a registered Chinese medical practitioner, a registered nurse, or a registered midwife) will be considered sufficient proof to avail the sick allowance related to pregnancy for purpose of medical examination.

The implementation of the amendment related to additional pay will be introduced in the first half of 2021, once the expected implementation of other amendments is done by the end of this year.

Implication

The employers in Hong Kong should be aware of the changes in employment laws. They will have to change their policies in concern with maternity, paternity leaves, and procedures upon implementation of the law.

India

For mandatory e-invoicing process, annual sales registration threshold raised to INR 5 billion from INR 1 billion

The mandatory GST e-invoice regime will take effect from October 01, 2020. Recently, the Central Board of Indirect Taxes and Customs (“CBIC”) has raised the threshold limit for mandatory GST electronic invoices. The annual sales registration threshold for mandatory e-invoices under the Goods and Services Tax Act (GST Act, 2017) is increased from INR 1 billion to INR 5 billion. However, some businesses are exempted from e-invoicing requirements such as financial services, located in special economic zone (“SEZ”), passenger transport services, and goods transport brokers.

Implication

Due to an increase in the registration threshold, small and medium-sized businesses are relieved from the e-invoicing requirements.

Extension of AGM till December 31, 2020 for F.Y. ended on March 31, 2020 without filing Form GNL-1

For the Financial Year ended on March 31, 2020, the deadline for Annual General Meeting (AGM) other than the first AGM has been extended by 3 months from the due date i.e. from September 30, 2020, to December 31, 2020, without filing an application for an extension in Form GNL-1. This does not apply to companies having their 1st AGM due.

Such orders are issued by ROC Pune, ROC Mumbai, ROC Hyderabad, ROC Bangalore, and few other states.

MCA enables companies to display their annual return on website and provides for including its web-link in the Boards’ Report

The Companies (Amendment) Act, 2017 provided for displaying the copy of the Annual Return of the company on the website of the company (if any) and the web-link of such annual return shall be disclosed in the Boards’ Report. The Central Government has now notified this provision and the date of enforcement of this provision is August 28, 2020.

MCA has also amended Rule 12 of Companies (Management and Administration) Rules 2014. As per the amended rule, a company that has already provided a web-link of its Annual Return in the Board Report is not required to attach the extract of the annual return with the Board's report in Form No. MGT.9.

CBDT confirms treatment of certain employee receipts under a simplified tax regime

The Central Board of Direct Taxes (“CBDT”) issued a notification dated June 26, 2020, for clarification of the tax treatment of allowances and perquisites received by an employee and has opted for a new simplified personal tax regime for the tax year from April 1, 2020, to March 31, 2021.

The following are certain allowances and perquisites which are exempt from tax where an employee has opted for a simplified tax regime:

  • Any allowance for traveling cost regarding business trip or transfers to another location from the employer’s place of work
  • Allowance given for meeting day-to-day expenses incurred by the employee due to absence from his/her normal place of work in respect of a business trip or transfer to another location from the employer’s place of work;
  • Allowance paid for travel expenses incurred for the performing duties of an officer or paid employment, other than where the employer has provided free transport facility;
  • Transport allowance given (not exceeding INR 3,200 per month) for a daily home to work travel expenses to an employee who is blind, deaf, dumb, or orthopedically handicapped with a disability of the lower limbs.

No tax exemption is granted for any vouchers for food and nonalcoholic beverages provided by the employer. However, the following exemptions are available for an employee opting for a simplified tax regime:

  • Free food facility and nonalcoholic beverages provided at an office or other business place by the employer;
  • Free food facility and nonalcoholic beverages provided during working hours in a remote area or at an offshore installation;
  • Tea or snacks provided during working hours.

Ireland

Ireland cuts VAT from 23% to 21% from September 1, 2020, till February 28, 2021

Ireland has reduced Value Added Tax rate from 23% to 21%. The VAT rate stands reduced from September 1, 2020, until February 28, 2021.

Japan

Workers given more time off provision for child care and family care

From January 1, 2021, workers may take time off on an hourly basis for childcare (ko-no-kango-kyuka) and family care (kaigo-kyuka) .

Short-term nursing care leave is 5-10 days, depending on the number of family members require care. Workers may take these leaves on a full-day or half-day basis. However, from 2021, workers can also take these leaves on an hourly basis.

Netherlands

Netherlands National Minimum Wage increases to EUR 1,680 per month from EUR 1,653.60

From June 2020, the national minimum wage in the Netherlands is increased from EUR 1,653.60 to EUR 1,680 per month.

Singapore

Singapore introduces Simplified Tax Return for companies with lower annual turnover

The Inland Revenue Authority of Singapore (“IRAS”) has introduced of new simplified form for the annual income tax return for companies having a lower annual turnover. The form will be called “form- C-S (Lite)”. The said form can be filed from the assessment year 2020. Form C-S (lite) only requires to fill up certain limited information. Companies filing Form C-S (Lite) are not required to submit their financial statements and tax computations. Companies should however prepare these documents and be ready to submit them if the IRAS requests for them .

The companies with an annual revenue of SGD 200,000 or less (of main income excluding income from other sources such as income from interest) will be eligible to file the form. Additional conditions for companies to be eligible to file this form include:

  • The company should be incorporated in Singapore;
  • The company only derives income taxable at the prevailing corporate tax rate of 17%, with certain specified exceptions; and
  • The company should not claim any of the following:

Further from the year 2020, all companies, including companies intending to file ‘form C-S (Lite)’ are mandatory to file their Corporate Income Tax (“CIT”) returns electronically on or before December 15, 2020.

Implication

The qualifying companies with annual revenue of less than SGD 200,000 will save the form filing time with simplified form C-S Lite. The companies may have to change their procedures of information collection for filing as per the requirements of the form.

Singapore’s Personal Data Protection Commission levies a fine of SGD 32,000 on Central Depository for inadequate security measures in protecting personal data

Personal Data Protection Commission (“PDPC”) imposes the fine of SGD 32,000 on Central Depository (Pte.) Limited for failing to put in place reasonable security arrangements to prevent unauthorized disclosure of personal data and insufficient testing mechanism before migrating from one mailing system to another to avoid risk of fraud and financial loss.

Foreign companies and limited liability partnerships are now required to file Register of Registrable Controllers / beneficial owners, with ACRA’s Central Register w.e.f. July 30, 2020

As per the current regulations regarding corporate beneficial owners in Singapore, the companies, including foreign companies and limited liability partnerships are required to maintain the register of Registrable controllers (“RORC”) either at its registered office or at the office of its authorized agent.

As per the new amendment rolled out by the Accounting and Corporate Regulatory Authority (“ACRA”) w.e.f. July 30, 2020, the companies who are already required to maintain RORC have to lodge the information contained in RORC maintained physically to ACRA’s central register (ACRA central RORC) by September 29, 2020.

Further, in case of a change in the information maintained in RORC, the Company shall ensure that such information is updated with ACRA central RORC within 2 business days once updated in the company’s own RORC.

Implication

The companies, foreign companies, and limited liability partnerships maintaining the register of registrable controllers (“RORC”) will have to undertake an additional compliance of filing the information contained therein with the central register (ACRA central RORC) before September 29, 2020. The change in the information will also be required to be tracked and updated,  before filing.

South Korea

South Korea plans to increase the individual income tax rate on the highest bracket; Tax will have to be paid at the rate of 45% on income above KRW 1 billion

The Korean Ministry of Strategy and Finance has announced its proposed tax law revisions on July 22, 2020, the changes, however, are still subject to the approval of the Korean National Assembly, if approved the tax rate will take effect from January 2021. The following is the table for the current rates and the revised rates for individual income tax.

Current rates:

Tax base (KRW)

Tax rates

12 million or less

6%

More than 12 million up to 46 million

15%

More than 46 million up to 88 million

24%

More than 88 million up to 150 million

35%

More than 150 million up to 300 million

38%

More than 300 million up to 500 million

40%

More than 500 million

42%

Proposed rates:

Tax base (KRW)

Tax rates

12 million or less

6%

More than 12 million up to 46 million

15%

More than 46 million up to 88 million

24%

More than 88 million up to 150 million

35%

More than 150 million up to 300 million

38%

More than 300 million up to 500 million

40%

More than 500 million up to 1 billion

42%

More than 1 billion

45%

Implication

The taxpayers earning income above 1 billion will have to pay more tax if the proposed law is approved. The employer should ensure that they are aware of the latest rates and should plan and implement withholding and payroll accordingly.

Spain

The minimum corporate income tax prepayment regime declared as ‘unconstitutional ’ by the Constitutional Court of Spain

The Constitutional Court of Spain declared that the "minimum CIT prepayment regime" introduced for reducing the public deficit, that was approved by ‘Royal Decree-Law 2/2016’ of September 30, 2016, as unconstitutional. The regime required taxpayers with a ‘net turnover above EUR 10 million’ to prepay 23% of the accounting profit obtained in the 3 rd month, 9 th month, and 11 th month in a year.

According to the judgment issued by the court, "duty to contribute to sustain public expenses, cannot be regulated through a Royal Decree-Law”.

Implications

  • From the year 2018 this Royal Decree was regulated by law/act, thus only years 2016 and 2017 will be affected and the retroactive effects of the judgment will have to be considered on a case to case basis.
  • Interest on delay for the amounts paid in excess through advanced payments between the period of self-assessment filing and refund between October 2016 up to 2017 may be claimed.

Sweden

New obligations and compliances for posting of workers in Sweden

With effect from July 30, 2020, Swedish legislation has implemented the Revised EU Posted Worker Directive into the Swedish Posted Workers Act. Below are the key points of the new legislation:

  • A posted worker will be entitled to the same level of salary as that of a Swedish worker performing the same work.
  • Any reimbursement paid to the posted worker in relation to his posting will be treated as a one-off cost and not a salary.
  • Temporary agency workers posted to Sweden will be treated at par with the Swedish temporary agency workers.
  • All standard Swedish terms and conditions of employment except for termination of employment, occupational pension scheme, post-employment restraint, etc. will apply to long term posted workers. Earlier only mandatory terms and conditions of employment were applicable to long term posted workers such as minimum wage, maximum working hours, minimum paid vacation days, etc.
  • Posting is considered a long term if it exceeds 12 months (18 months in exceptional cases).
  • The foreign employers posting workers to Sweden are required to notify the Swedish Work Environment Authority from the first day of posting regarding such posting starts and the contact person in Sweden. Earlier the obligation to register was not applicable for posting up to 5 days.
  • Employers are required to provide documentation to the service recipient in Sweden with respect to the declaration made to the Swedish Work Environment Authority. If such documentation is not received by the service recipient, then the Swedish Work Environment Authority must be notified within 3 days after the work has started.
  • Failure to comply with the notification requirements by the employer and service recipient will lead to an administrative penalty of SEK 20,000.

Implication

The new legislation on posting workers to Sweden will increase the compliance burden for employers. The employer will have to ensure that the salary is in line with a Swedish worker before such transfer.

Switzerland

Federal Act on Gender Equality (GEA) implemented

Effective from July 01, 2020, new provisions of the Gender Equality Act (“GEA”) came into force and will be applicable for 12 years, i.e. January 1, 2032.

Private and public employers with more than 100 employees (not including apprentices) are required to create an internal equal pay analysis for the current year by the end of June 2021 at the latest.

Implications

  • The auditor is required to verify the analysis with all the document and information provided by the company;
  • Workers are to be informed in writing of the result of the analysis no later than 1 year after the audit;
  • There is no sanction in the provision against the employer for non-compliance.

Revised tax-at-source rules for payroll processing, effective 2021

Effective from January 1, 2021, Federal law on revision of tax-at-source (Impôt à la source or Quellensteuer) will be implemented. The new law introduces ordinary ulterior taxation (Taxation Ordinaire Ultérieure - TOU) which will affect all the current resident and non-resident taxpayers who are taxed at source. The companies will be required to get registered under revised tax at source rules with authority of tax-at-source of each canton where employees reside. Following are revised provisions of said rule:

  • An annual and monthly model of calculation will be available depending on the canton;
  • Declaration of the tax-at-source to the appropriate canton;
  • A specific calculation for part-time workers;
  • A specific calculation on compensation paid before starting or after ending the employment    agreement.

Implications

  • Employers are required to review the rules and assess the impact it has on payroll processes, both from the side of the employer and the affected employees;
  • Companies are required to register with the tax-at-source authority of each canton where employees reside;
  • Introduction of ordinary ulterior taxation (Taxation Ordinaire Ultérieure - TOU).

VAT Guidelines revised regarding electronically supplied services (ESS)

On July 23, 2020, the Swiss Federal Tax Administration (“SFTA”) revised term of electronically supplied services (“ESS”).

The revised terms clarify, now foreign companies providing ESS to non-VAT registered Swiss customers and has a worldwide turnover of more than CHF 100,000 per year are required to register for VAT prior to the start of operations in Switzerland.

Implications

VAT registration in Switzerland will now apply to most business providing ESS in Switzerland.

Electronic filling VAT return made mandatory from 2021

From January 1, 2021, the Swiss Federal Tax Administration (“SFTA”) replaced the traditional paper-based VAT return system with the Switzerland Tax Platform. Onward 4 th quarter of the year 2020 the VAT return should be submitted electronically to SFTA. The tax portal provides the facility of filing online Monthly/Quarterly VAT returns as applicable. The Taxpayer can apply for an extension and file a corrective VAT return.

Implications

  • A relief to the non-Swiss entities from mailing paper forms to the authorities
  • Some business will have to adopt to the e- filing of VAT returns.

United Kingdom

Any variation in employment contract (beneficial or not) for TUPE transfer is considered as void

The Transfer of Undertakings (Protection of Employment) Regulations provides employment rights to employees when their employer changes as a result of transfer of an undertaking. These regulations automatically transfer the employment of employees assigned to a transferring business, or part of a business, from the original employer (transferor) to the acquiring business (transferee).

As per the recent case study, under TUPE transfer,  any variation in employment contract whether beneficial or not shall be considered as void. Such beneficial variations may be in the form of increase in remuneration packages, bonus payments, termination payment in relation to the length of service, etc.

UK’s Making Tax Digital (MTD) will be applicable to all UK businesses regardless of turnover effective from April 2022

Currently, UK’s Making Tax Digital (“MTD”) applies to businesses having UK taxable turnover above the VAT registration threshold i.e. GBP 85,000. The Making Tax Digital (“MTD”) regime requires businesses to have digital VAT records and submission of VAT returns through compatible software.

From April 2022, MTD will be made applicable to all UK Value Added Tax (“VAT”) registered businesses irrespective of their turnover. In addition, from April 2023, MTD regime will be applicable to certain business income tax records.

UK’s Information Commissioner's Office (ICO) issues enforcement notice and monetary penalty notice for violations under Privacy and Electronic Communications (EC Directive) Regulations 2003 (PECR)

The Information Commissioner’s (“ICO”) has issued an enforcement notice and a monetary penalty notice to “Koypo Laboratories Limited” for instigating the transmission of 21,166,574 unsolicited email communications to subscribers without obtaining their consent.

The penalty notice is issued on the basis of a serious contravention of Regulation 22 of the Privacy and Electronic Communications (EC Directive) Regulations 2003 ('PECR'). It also mentions the reduction of penalty to GBP 80,000 if paid in full to ICO.

Implication

Any violation of law will lead to massive costs to businesses and will affect the business adversely.

Global Updates

Greece: range of incentives offered to businesses for implementing e-invoicing

The Greek government for encouraging the businesses to implement the e-invoice system, has rolled out a number of incentives for businesses. The following are the incentives:

  • VAT credit refunds will be provided within ‘45 days’ of an application instead of ‘90 days’
  • The capital equipment investment cost will be allowed to be fully written off in the year of acquisition itself. Also, the costs of producing and submitting electronic invoices will be allowed to be written off.
  • The length of the limitation period for issuing a VAT assessment to be lowered from 5 years to 2 years.

Implication

The companies incorporated in Greece will benefit from the incentives upon adopting e-invoicing system. The companies will have to start analyzing, upgrading old systems, and preparing for e-invoicing.

Philippines to Impose VAT on Digital Services at the rate of 12%

Philippines has joined the list of countries planning to impose VAT on digital services.  The House Panel approved the bill for VAT on digital services on July 29, 2020.

The registration by a non-resident digital service provider shall be mandatory in cases where:

  • Gross sales/receipts (excluding exempt sales) ‘from the Philippines’ exceed or are reasonably expected to exceed PHP 3 million, in the past 12 months; or A 12% withholding tax to be levied upon payment in case of failure of a non-resident provider to register for the tax.

A digital service provider is defined as an entity:

  • That provides digital service or goods to a buyer through an online platform for purposes of buying and selling of goods or services or
  • Makes transactions for the provision of digital services on behalf of any person.

A digital service provider may include:

  • A third party conduit receiving commission for goods or services offered by a supplier to a buyer;
  • A promotion platform provider delivering marketing messages digitally to attract buyers;
  • A host of online auctions conducted through the internet, etc.

A digital service includes, online licensing of software, mobile applications, video games, online games, electronic marketplace services, etc.

Implications

  • The philippine government will have additional sources of revenue to fund increased government spending.
  • Non-resident digital service providers, providing digital services in Philippine, will also be liable for assessing, collecting, and remitting the VAT on the transaction but they will be able to claim an input tax credit.

© 2020 Shan & Co

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